Effective Currency Management in Global Equity Portfolios

In a recent portfolio management meeting, an asset manager discussed the impact of currency fluctuations on the returns of a global equity portfolio. The portfolio is primarily invested in US equities but holds a substantial allocation in European and Asian markets as well. The manager pointed out the need for effective currency risk management strategies to mitigate the adverse effects of currency depreciation.

As part of the strategy, the manager proposed three options for currency hedging:

1. Using forward contracts to lock in exchange rates for future currency needs.
2. Pursuing a dynamic hedging strategy that adjusts based on market volatility.
3. Investing in a diversified basket of currencies to spread the risk.

Which currency management strategy should the asset manager consider as the most effective for minimizing currency risk in this global equity portfolio?